No-deal Brexit will kill startups, say eco-coffee capsule firm bosses

12/01/2019

A British startup trying to counter the waste created by single-use coffee capsules says it will be strangled at birth by a no-deal Brexit. The founders of Moving Beans say Brexit is like a “bomb dropping” on their business, which started manufacturing in February. Moving Beans began producing coffee capsules using the fibre from sugar…

A British startup trying to counter the waste created by single-use coffee capsules says it will be strangled at birth by a no-deal Brexit.

The founders of Moving Beans say Brexit is like a “bomb dropping” on their business, which started manufacturing in February.

Moving Beans began producing coffee capsules using the fibre from sugar beet in response to a growing environmental backlash against single-serve pods such as those from Nespresso, which are advertised by George Clooney.

The company claims to be the “first in the world who have managed to solve the problem of producing Nespresso-compatible coffee capsules which are compostable and maintain a delicious coffee taste”.

But the team now fear for their future because of Brexit.

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Moving Beans employs three people and produces 5,000 capsules a month, with plans to expand to a staff of about 20 in two to three years.

“We are trying to make a real difference, but this Brexit mess may actually really backfire on our company and eventually on the environmental wellbeing of the UK,” said co-founder Mike, who asked for his surname not to be published.

“Falling back on the World Trade Organization will close many UK SMEs [small and medium enterprises] – it’s real, not ‘project fear’,” he said.

“The bomb dropped [when] our fulfilment company in the UK sent us the tariffs we would need to pay if we were to fall back on World Trade Organization rules and the paperwork which would need to be provided. Our margins are gone, directly because of import fees (VAT + duty) and indirectly because of staff spending more time doing admin.”

They were told that under WTO tariffs they would have to pay 7.5% extra to import coffee for their capsules, which are manufactured on mainland Europe and could also attract a tariff – enough to decimate their profits.

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Mike explained that small margins or fluctuations in currency exchange rates could be absorbed by bigger and older businesses but not by startups, where everything is fine-tuned.

“Margins are very tight in the business; we had to scout for a factory which is affordable whilst not compromising the quality of the product. We found one a year back, but in mainland Europe. We have been importing over past months, and it has worked really great, with customers loving our product and us not having had any troubles with the supply chain.”

His partner Dan said if the company was “shifting massive volumes” it might be able to “ride through and hope for the best” but at the moment it is less than a year old and in a delicate startup phase of the business cycle.

Dan and Mike agreed to speak out after reading of other small- and medium-sized businesses struggling to work out how they can absorb a no-deal Brexit.

They are among many small businesses and entrepreneurs incensed with politicians such as Conservative backbencher Nadine Dorries, who recently said “no deal won’t crash the car”.

Nadine Dorries (@NadineDorries)

No deal won’t crash the car. It will be a short bumpy ride and then voom, straight into the fast lane, leaving the sinking economics of the EU behind.

Shuan Loughlin, the founder and director of Freestyle Extreme, told the Guardian Brexit was a ‘business bankrupter’. Photograph: Adrian Sherratt for the Guardian

Dan and Mike said they were inspired to launch Moving Beans after reading about the “horrendous amount of waste” caused by Nespresso and other capsule machines, which produce capsules “almost impossible” to recycle.

They hoped their product would be a winning formula for those who want the convenience of the coffee capsule machine but are conscious of the waste. But, Dan explained, there is a point at which consumers will not be willing to pay extra for environmentally-friendly products.

In the worst case scenario, Moving Beans will concentrate on exporting from its factory in the EU to central Europe rather than selling to the UK.

However, this is not what the duo had envisaged. “We are a company established in the UK and we would like to keep up the momentum here and keep people employed here,” said Dan.

But their ultimate goal is to make a difference environmentally as well as to make coffee, so Moving Beans may have to quit Britain if the UK crashes out of the EU and the business is no longer viable.

“We are on a mission to produce great coffee in sustainable way and if that means having to move elsewhere, then so be it. It is something we have discussed and something we will decide on as the Brexit deadline gets closer,” said Dan.

If you own or run an SME and are likely to be affected by a no-deal Brexit, contact lisa.ocarroll@theguardian.com